Posts Tagged ‘supply chain’

A recent article in APICS Magazine notes that organizations sometimes fail to leverage the power of their supply chain, despite the fact that effective supply chain management has been shown to improve overall organizational efficiency, heighten effectiveness, reduce costs, streamline material and information flows, boost margins and ROI and improve competitive advantage.

Why? They suggest maybe it’s because too many believe it to be a “back office function” that is merely a cost center and a necessary evil, thus rendering the results invisible. But this couldn’t be further from the truth notes Gary Smith, VP of Logistics for New York City Transit, and an APICS certified CFPIM. Indeed, he notes, the very visible benefits are plainly apparent when you look at a company like Amazon, which you can bet thinks very deeply about its supply chain – so it’s customers don’t have to.

The article goes on to note three barriers that often prevent supply chain management from being seen as valuable:

Supply chains are far from being optimized tactically, and there continues to be a lack of aware of the value they can bring to organizations.

Supply chain management is not considered strategic. In fact, delivery and procurement ought to be a part of every organization’s strategic planning process. It’s a strategic investment.

The necessary decision support tools including warehouse management, forecasting, advanced planning and scheduling and procurement optimization can actually help automate – and improve — many of the routine decisions otherwise made (with great fallibility) by humans.

These automation tools in turn enable teams to make choices faster, with better results, so that people can “focus on the issues that can halt operations and add tremendously to costs,” notes Smith.

It’s an investment – in tools, staff, training and the application of best practices. But it’s an investment with a return that will keep on giving as you automate what can be automated and leave your most important asset – your people – free to work on harvesting the remaining, truly value-laden (and oftentimes, higher-hanging) fruit.

About twenty years ago American manufacturers began changing the face of the supply chain when they began “offshoring” — moving production to cheaper sources in foreign nations, expanding a national supply chain into a global one. Fast forward 15 years or so, and a fair portion of that production has been seen returning home once again due largely to quality issues, but also to the increasing cost of much of that foreign manufacturing, once things like travel, shipping, duty fees, vendor due diligence, theft and piracy and a host of other issues are factored in.

Today, the opportunities and challenges afforded by 3D printing are beginning to create still another new form of “reshoring” that is poised to challenge everything we know about manufacturing. Since its first patent was issued over 30 years ago, 3D printing is quickly becoming ubiquitous. Its capabilities are now way beyond the prototype state, and the variety of materials that can be used has grown exponentially, notes John Collins, an APICS CFPIM, and Erick Jack dean of the Collat School of Business in a recent article for APICS Magazine.

Then there’s the recent article in The Economist (“A Third Industrial Revolution”), noting that the digitization of manufacturing is as significant as the mechanization of the textile industry and the introduction of mass production in the automotive sector. “The ability to produce smaller batches of items tailored to specific customer needs at significantly lower costs could make the factory of the future look more like the weaver’s cottage than Ford’s assembly line.” And that’s not to mention what this development implies for the changing skill sets of today factory workers as design and programming grow in emphasis.

Some are predicting that global logistics efforts will be reduced as manufacturers shift more of the capabilities and production back to their home shores to take advantage of customer and market proximity. According to the PLS Logistics Blog, “part of the supply chain will become superfluous.”

When you think about, it makes sense if manufacturers can deliver small batches of customized products and prototypes. It makes for leaner inventories, for one. It increases the ability to respond more quickly to customer requests. Manufacturers may be able to respond to orders directly from factories, thus eliminating some distribution elements. Locations of stock might be consolidated, and transportation routes are likely to contract as smaller manufacturing locations provide more local 3D printing.

Collins and Jack ask whether it “might even be possible that 3D printing will supersede the concepts of nearshoring and reshoring. After all,” they state, “where a manufacturing facility is located won’t matter much if customers can ‘deliver’ the products they purchase at home via a personal 3D printer.”

The supply chain of manufacturing has long been all about “speed, cost, quality and flexibility.” 3D printing provides both challenges and opportunities in all these. Creating ways to incorporate new technologies like 3D printing into our processes provides plenty of both – including the opportunity to be an innovator while remaining competitive in a changing supply chain landscape.

As most of us have noticed by now, the pace of technology – long proceeding at a snail’s pace as generation after generation lived more or less as their parents had – has been accelerating at what to many feels like a breakneck rate. We’ve gone from linear progress to exponential, moving from the industrial revolution to the current digital one at an ever-quickening pace.

Moore’s Law, now over 50 years old, postulated that the number of transistors per square inch on a circuit board would double every year or two since – and today, that continued pace means that exotic technologies that include AI (artificial intelligence), robots, cloud computing and 3-D printing systems are proliferating, evolving in many cases faster than we humans can keep up. It seems like things keep getting faster, smaller and smarter.

And therein lies the downside of all this technical innovation, says Gary Smith, a logistics expert with the New York City Transit in a recent issue of APICS Magazine. Smith believes that “the rate of technological change exceeds the rate at which we can absorb, understand and accept it.” This is acutely true in the world of supply chain, with its deep reach into manufacturing, distribution and just business in general.

Most importantly he notes that “disruptive technologies require a workforce that adapts to new processes, new ways of learning and training systems.” In that spirit, he suggests key considerations and qualities that are going to be important within supply chains of the future, ones that the next generation workforce can expect to have to incorporate into their work patterns. Among them:

Data analysis and database development skills. The ability to analyze and produce actionable results from data using logic and fact with insightful opinions and interpretation of available data will be critical.

Critical thinking. It’s vital to data analysis and fact-based decision making. The ability to quickly acquire knowledge and break it down into its logical components, and then analyze and drill for accurate and actionable conclusions matters. You have to be able to take complex situations and break them down into their component tasks. Or as Franklin Covey would say, “start with the end in mind.” Critical thinking means “abstraction, systems thinking, experimentation and collaboration,” notes Gary Smith. To wit:

Abstraction. The ability to discover patterns in data. Often, lessons from one industry can be applied to another, for example.

Systems thinking. That is, viewing issues as a part of the whole – how issues relate to the rest of a system. Often, the “good of the many outweighs the good of the few.”

Experimentation. Complex problems require trial and error, testing and experimentation. It’s okay to fail, as that’s part of learning. Fail fast, think differently and learn to adapt as new conditions present themselves.

Collaboration. It’s working with others toward the common goal. Easier said than done. It requires team-building and facilitation skills, along with everyone keeping their eyes on the prize. Collaboration is particularly important in supply chain and ERP work, where silos need to be broken down and people need to cooperate and effectively communicate.

These are the critical skills companies will be looking for. We see the need for it every day in ours, and we’re only one of many. So in a very real sense, the future really is now.

Recently, in an article for APICS Magazine, Jonathan Thatcher, director of research for APICS (an organization long dedicated to supply chain operational excellence), listed a few tips for companies challenged by an ever-increasing number of SKUs (stock-keeping units, or inventory items) they are required to manage. We thought we’d reprise a few key highlights here today.

Thatcher recommends starting at the top of the cycle: by developing greater “systemic visibility” in your organization using hard numbers and data to support a “systems concept,” which the APICS dictionary defines as “an attempt to create the most efficient complete system as opposed to the most efficient individual parts.”

To begin with then, you must identify the flow of many individual components while also reviewing the performance of the overall supply chain. Each new SKU increases cost and complexity to the entire system. As these costs grow, it gets harder to maintain an accurate “cause-and-effect vision” of expense and value for the entire system. “Even if a new SKU does deliver some new net value,” he writes, “is it enough to profitably pay for the cost of the increasingly complex stocking options?”

Next, he advises, talk to your customers to figure out where to draw the line for SKU proliferation. Ask them to identify the point where more SKUs become a burden instead of an asset. This can help determine a potential SKU limit.

To gain executive support for your SKU reduction endeavor, Thatcher says you then need to explain a few things:

SKU innovation may be at war with Pareto’s 80/20 law that states that 20% of inventory items make up 80% of inventory value.

The right number of SKUs likely reflects the amount of variation and complexity sought by your customers.

The wrong number of SKUs squeezes resources and can divert them away from the products that deserve them.

Realize that it’s a complicated and often nuanced topic that requires ongoing, shared management effort to overcome these complexity costs.

And finally, Thatcher suggests, “develop a policy prohibiting a net increase in SKUs. As new ones appear, retire old and low value SKUs to make room.” Just be sure that these efforts form a part of your overall supply chain strategy that prioritizes innovation, customers service levels and reduced costs.

We began in our prior post with a brief primer on a new database technology called blockchain. Today, we’ll look at its potential impact on supply chains and other areas.

Blockchain has the potential in supply chains to save costs, and of course reduce errors. Since all sides have the same view of a common transaction, there is no re-scripting or recording. According to Blythe Masters, CEO of Digital Asset Holdings, in an interview with the Wall Street Journal’s Kimberly Johnson on 6-20-16, the major market infrastructure providers – think: exchanges – are operating on decades old infrastructures. In banking alone, she estimates, there are billions of dollars out there in potential savings.

In supply chain coordination, you are “managing the movement of money in return for the provision of goods and services,” notes Masters. And the most efficient way to do that is when “there’s no disagreement between those parties about the timing of when cash should flow… and/or goods are needed to be supplied [or] manufactured, as you work your way back in the manufacturing process.”

Essentially, blockchain then is software, in that it allows you to share information in a secure environment between different points on a network. And importantly, it doesn’t require all new, capital intensive hardware infrastructure.

What blockchains ultimately will do, of course, is greatly improve the speed of transactions, which saves costs all up and down the chain. In the finance arena, for one, transactions that originally required, days to be consumed for legal or administrative reasons will now happen in seconds. Eliminating these delays, whether in banking or in supply chain, frees up capital, eliminates the need for most low-value-added handling processes done largely by back office operations spent tying together two or more different records of the same transaction, and lubricates the flow of trade and money.

Circling back to bitcoin and crypto-currencies one last time, a later article in the Journal mentions yet another “hot thing in cryptocurrencies,” one of the newest variants on blockchain. It’s called “Ethereum” and it’s an open-source software platform with a currency called “ether.” It too is a public blockchain ledger, with all the “tools for building so-called smart contracts that automatically make payments when their terms are fulfilled.” With Ethereum’s open-source software construct, anyone can develop applications that take advantage of its code.

The Journal notes in a June 21st article (“Bitcoin Rival Gains Steam”) that the investors in Ethereum are part of a growing revolt “against the centralization of the internet under big companies like Google and Facebook by creating financial structures that can run themselves.”

But, just like bitcoin, the platform has its challenges. It recently suffered a large theft of its virtual security when “a hacker rewrote some of the startup’s code and funneled money into a private account.” The price of ether dropped 43% upon disclosure of the hack. Still, as the Journal notes again, the underlying technology that underpins currencies like these “open and immutable transaction ledgers” could transform a wide variety of commerce for millions of consumers, in particular in finance and banking.

Ultimately, these blockchains are going to grow, becoming more transparent, efficient and secure than existing online platforms. Still, critics say they have a long way to go before it reaches stability and mainstream adoption, and that the technology is largely unproven.

But then, we’ve heard that about just about every technology that’s come before. Including of course, the Internet.

If you follow technology… or finance… or digital era trends at all… you’ve probably heard about something called “blockchain.”

We’ll post this today on our tech blog because blockchain is, after all, about technology – actually, software – at its core. Because it will eventually affect the supply chains many of us work with, and because it’s likely to affect all of us soon enough, today we’ll provide some simple background – and perhaps clear up confusion – about this burgeoning new technology.

If you know about blockchain at all, chances are it’s because it’s the structural foundation for something called “bitcoin.” Bitcoin has gained notoriety for being a new form of cryptocurrency that’s been in the news mostly because of its favored role by folks engaged in certain darker parts of the economy, where anonymity in fund transfers is a desirable trait.

But blockchain also has the potential to change the way companies make and verify transactions (hence, our earlier nod to supply chains). As Blythe Masters, CEO of Digital Asset Holdings said in an interview with the Wall Street Journal’s Kimberly Johnson (6-20-16), the simplest way to think about what this technology is all about is actually very unexciting.

And that is: a new, clever form of database architecture. We all use databases every day in business extensively, from our CRM applications to our accounting systems. They are mostly just two dimensional tables of rows and columns. They’re “siloed and generally centralized,” and usually managed by folks with the administrative rights to do so.

But here’s the thing about the new blockchain database technology: When multiple parties to a common transaction interact, they are each, notes Masters, “inclined to keep their own separate records of their respective piece of a joint transaction, and that leads to tremendous inefficiencies.” An enormous amount of time, and not just in financial services, can be spent reconciling differences between records kept in these separate databases, all of which ultimately refer to the same base transaction between the parties.

Blockchain, then, provides the ability to coordinate that information in a centralized place… “where only the entities with the need and right to know their respective piece of the information can access it.”

Blockchain uses the modern science of encryption to create what’s called a “distributed ledger” to enable the parties to any transaction share a common infrastructure. This has great appeal to banks, exchanges, and market-infrastructure providers. With a distributed ledger commonly but securely available to all, you can cut a significant amount out of the cost of a transaction, not to mention reduce the time it takes (and time equals money, eventually) to complete a transaction that has been agreed to by the common parties in the marketplace.

In a recent article from Bloomberg (“Focus On/Manufacturing” August 2015) the editors note that Intel and Texas Instruments have pretty much by now perfected the sci-fi form of manufacturing known as chip fabs – pristine, windowless clean rooms where some of the world’s most sophisticated chips are fabricated. They run 24 hours a day, knowing that these multi-billion dollar plants could be made obsolete in as little as five years or so, as new technologies and capabilities leapfrog the old.

Now these firms want to show the rest of the world how it’s done. The goal: an estimated (by IHS) $185 billion global market for the gear to automate industrial production. To do so, firms like Intel and others are prodding companies to bring the IoT (Internet of Things) – physical objects embedded with electronics that talk to one another – into factories.

According to Bloomberg, on the assembly line of tomorrow, “industrial robots now caged off to prevent them from accidentally injuring human workers will move about more freely. A machine outfitted with optical and motion sensors would be able to detect a hand that is delivering a tray of parts and adjust its movements so as not to inflict damage.”

Intel is also working to make technology for humans on the shop floor less error prone, including gloves that use chips to power a display on the wrist. If an assembly worker correctly completes a task, a large green check mark appears; if not, a red crosses flashes on the screen – a useful accessory first conceived by a group of ex-BWM employees that could become a useful accessory in auto and electronics plants.

While autonomous robots may be years away, Ethernet connections are now making a real entrance onto the floor, while Wi-Fi, per Bloomberg, has hardly made a dent, meaning most plants don’t have the communications infrastructure – yet – to support the Internet of Things. But it’s only matter of time.

This is partly by design however, it must be noted: Hackers cannot penetrate systems that aren’t connected to the outside, as the IoT, by definition, would. As the head of embedded processing for Texas Instruments wisely noted, “The best way to protect your system is to disconnect it from the rest of the world… while the very idea of IoT is to connect it to the rest of the world.”

To allay these concerns, TI is pushing the development of multiple networks, so that a wireless link that transmits information on the internal workings of a machine can’t be hijacked to take control of the machine itself. This is similar to the recent staged hack of a Jeep Cherokee that made news in July.

Still, as Intel is showing, advances in shop floor IoT have demonstrated benefits. At one unnamed Intel facility, sensors and software correctly identified that pumps used to manufacture silicon wafers were about to fail. The clue was found in irregularities in the pumps’ normal pattern of vibrations, detected by this sophisticated application of IoT.

For the near future, it’s thought that selling companies on the use of electronics for somewhat “discrete” functions, such as maintenance, will be a much easier sell than overhauling entire factories so every machine’s data can be parsed by computers. But some do see a day when “factories will be able to talk directly to warehouses, which will be in communication with stores, which will allow companies to tailor production more carefully to demand,” as the article’s editors note.

The grand goal of this smart manufacturing is to create the ultimate supply chain – and if technology and computers have proven anything to us, it’s that it is only a matter of when, not if.